Question: EOQ Without Instantaneous Receipt Model (Production Run Model)

The wholesale distributor has traditionally relied upon an instantaneous receipt model in which the material associated with each order is received in a single batch. The toilet manufacturer has suggested to the president of the wholesale distributor that he might want to consider agreeing to accept receipt of ordered material incrementally over a period of time rather than in a single batch as a means for reducing total annual costs. The toilet manufacturer has advised that his factory’s daily production rate is 60 toilets and the set-up cost for each production run is $500. The estimated annual demand, estimated average demand per day, purchase cost per unit, lead time for a new order, and average holding cost per unit per year remain the same as stated in the scenario for the current ordering model. Answer questions 7 through 10 using the EOQ without instantaneous receipt model (production run model) in which goods are incrementally delivered at the same they are being still being produced.

? What is the optimal order quantity without instantaneous receipt?

? What is the maximum number of units in inventory without instantaneous receipt?

? What is the average dollar value of inventory without instantaneous receipt?

? What is the total annual cost (i.e., Purchase Cost + Ordering Cost + Holding Cost) without instantaneous receipt?